Crypto Prices Could Pump This Week as Federal Reserve Interest Rate Decision Approaches
Prices of major crypto assets could pump hard this week if the Federal Reserve in the US even hints at slowing the pace of rate increases later this year.
The expectation that markets could rally this week leading up to – and potentially following – the Fed’s rate announcement on Wednesday is shared by both investment banks and members of the crypto community. However, opinions still differ on what a rally will look like and what exactly is needed for it to happen.
It is widely expected by analysts that the Fed will raise rates by 75 basis points this week, but economists are unsure what will happen at the next Fed meeting in December. The expectation for a 75-point hike at this meeting is also shared by the market, with derivatives exchange CME’s FedWatch Tool currently indicating an 86% probability that the Fed will raise rates by 75 basis points.
Notably, the tool also indicates a 14% chance that rates will only rise by 50 basis point, something that would certainly trigger a rally in the crypto market.
According to a note from the major investment bank Merrill Lynch, a discussion about slowing the pace of rate hikes starting in December have likely taken place at the Fed. The bank therefore expects that Fed chair Jerome Powell will communicate that such discussions have taken place, which could open the door for moving to a 50-basis point hike in December.
Similarly, Goldman Sachs, another large Wall Street bank, said in a note that it also believes in a 75-basis point hike this week, likely followed by a 50-basis point hike in December.
“We expect the FOMC to eventually pair that slowdown to 50bp in December with a somewhat higher projected peak funds rate in the December dot plot. We are adding another 25bp hike to our
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